Daily Morning Note – 4 January 2019

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YOUR PHILLIP SUMMARY

U.S. stocks closed down Thursday, with the Dow Jones Industrial Average sinking more than 600 points as Apple Inc. posted its biggest percentage drop since 2013 while investors reacted badly to a weaker-than-expected reading on manufacturing activity. The Dow Jones Industrial Average slumped 660.02 points, or 2.8%, to 22,686.22. The S&P 500 index shed 62.14 points, or 2.5%, to 2,447.89, and the Nasdaq Composite Index tumbled 202.43 points, or 3%, to 6,463.50.

Apple slashed its quarterly revenue forecast for the first time in more than 15 years Wednesday evening, in a move that the iPhone maker’s chief executive, Tim Cook, said was prompted by signs of weakness in the world’s second-largest economy — China.

Survey from the Institute for Supply Management showed U.S. manufacturing growing at the slowest pace in two years, intensifying concerns among investors that the U.S. economy is running out of steam along with other large economies in Asia and Europe.

There were also fresh signs of Chinese economic weakness as its official manufacturing reading for December showed a more severe drop than one issued earlier, reflecting a fall to the weakest level since February 2016.

Source: MarketWatch.com

RESEARCH REPORT

Phillip 2019 Singapore Strategy – Reversal of flows

– STI is trading at the lows of its 10-year valuations

– Flows return as more turmoil in U.S. politics, tail-end of rate hiking cycle and
truce in US-China trade.

– STI target of 3400 and lower-beta dividend focused Phillip Absolute 10 for
2019

Singapore Telecom Sector – Better than it seems

Recommendation: OVERWEIGHT, Analyst: Alvin Chia

Singtel Limited – Turnaround in Associates

Recommendation: BUY, Last Close: S$2.86, TP: S$3.40

– We expect a turnaround in associates largely driven by recovery in
Telkomsel

– TPG Telecom is unlikely to pose a serious threat to the incumbents

– Enterprise business will benefit from resumption of smart nation initiative

StarHub Limited – Anticipating growth in enterprise

Recommendation: ACCUMULATE, Last Close: S$1.70, TP: S$1.88

– Pay-tv business cost structure could improve

– Anticipating growth in enterprise fixed

– S$210mn restructuring exercise will help cushion decline in mobile and paytv

– TPG Telecom is unlikely to pose a serious threat to the incumbents

M1 Limited – Accept the VGO

Recommendation: NEUTRAL, Last Close: S$2.09, TP: S$2.06

– Shareholders should accept the VGO

– M1 is most exposed to TPG Telecom’s entrance to the Singapore market

– Mobile postpaid & fixed services revenue is growing at healthy numbers

2019 U.S. Banking Sector Outlook – Market too pessimistic

Recommendation: Overweight, Analyst: Edmund Xue

– Recent flattening of the yield curve is likely to have bottomed and will not
herald a recession in the upcoming year.

– Funding costs will pick up pace but offset by faster loan repricing and
sufficient supply of funds of banks.

– Asset quality remains benign, with small business commercial and industrial
(C&I) loans driving loans growth.

– We have an Overweight recommendation for the U.S. Banking Sector.
Valuations are at 25-year lows.

Due to changes in analysts and/or redeployment of analyst, the
following stocks will be dropped from our coverage list. The previous
ratings can no longer be relied upon.



– Dairy Farm International

– Fraser & Neave

– Chip Eng Seng Corporation Ltd

– Ho Bee Land.

BREAKING NEWS

Creative Technology announced the worldwide launch of the Super X-Fi headphone holography technology at CES 2019.

Teho International will distribute up to 53,714,286 vendors shares as part of a settlement agreement.

LTC Corp to suspend trading from Jan 11 and will be delisted from the Singapore Exchange at a date to be announced in due course.

According to a report issued by the Singapore Exchange, the Straits Times Index (STI) generated annualised total returns of 9.2 per cent in the period 2009-2018, thanks to the boost from reinvestment of dividends. Without reinvesting dividends, the 30 STI component stocks would have yielded lower annualised returns at 5.7 per cent over the same ten-year period.

Source: SGX Masnet, The Business Times

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

Read the research report(s), available through the link(s) above, for complete information including important disclosures

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